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Court File No. CV-18-00611214-00CL

ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

B E T W E E N:

SEARS CANADA INC., by its Court-appointed Litigation Trustee,

J. DOUGLAS CUNNINGHAM, Q.C.

Plaintiff

and

ESL INVESTMENTS INC., ESL PARTNERS, LP, SPE I PARTNERS, LP,

SPE MASTER I, LP, ESL INSTITUTIONAL PARTNERS, LP,

EDWARD S. LAMPERT, EPHRAIM J. BIRD, DOUGLAS CAMPBELL,

WILLIAM CROWLEY, WILLIAM HARKER, R. RAJA KHANNA, JAMES

MCBURNEY, DEBORAH ROSATI and DONALD ROSS

Defendants

FACTUM OF THE ESL PARTIES

(Motion to Strike Returnable April 17-18, 2019)

March 29, 2019 POLLEY FAITH LLP

The Victory Building

80 Richmond Street West, Suite 1300

Toronto, ON M5H 2A4

Harry Underwood (20806C) [email protected] Andrew Faith (47795H) [email protected] Jeffrey Haylock (61241F) [email protected] Sandy Lockhart (73554J) [email protected]

Tel: 416.365.1600

Fax: 416.365.1601

Lawyers for the moving parties/defendants

ESL Investments Inc., ESL Partners, LP, SPE I

Partners, LP, SPE Master I, LP, ESL

Institutional Partners, LP and Edward S.

Lampert

2

TO: THE LITIGATION SERVICE LIST

Litigation Service List Last Updated Mar. 8, 2019 at 11:27 AM

CAN_DMS: \125077696


ONTARIO SUPERIOR COURT OF JUSTICE

(COMMERCIAL LIST)

B E T W E E N:

FTI CONSULTING CANADA INC., in its capacity as Court-appointed monitor in proceedings

pursuant to the Companies' Creditors Arrangement Act, RSC 1985, c. c-36

Plaintiff

and

ESL INVESTMENTS INC., ESL PARTNERS, LP, SPE I PARTNERS, LP, SPE MASTER I, LP, ESL INSTITUTIONAL PARTNERS, L.P., EDWARD S. LAMPERT, WILLIAM HARKER

and WILLIAM CROWLEY

Defendants



(COMMERCIAL LIST)

B E T W E E N:

SEARS CANADA INC., by its Court-appointed Litigation Trustee, J. DOUGLAS CUNNINGHAM, Q.C.

Plaintiff

and

ESL INVESTMENTS INC., ESL PARTNERS LP, SPE I PARTNERS, LP, SPE MASTER I, LP, ESL INSTITUTIONAL PARTNERS, L.P.,

EDWARD LAMPERT, EPHRAIM J. BIRD, DOUGLAS CAMPBELL, WILLIAM CROWLEY, WILLIAM HARKER, R. RAJA KHANNA, JAMES MCBURNEY, DEBORAH ROSATI and

DONALD ROSS

Defendants


CAN_DMS: \125077696



(COMMERCIAL LIST)

B E T W E E N:

MORNEAU SHEPELL LTD., in its capacity as administrator of the Sears Canada Inc. Registered Pension Plan

Plaintiff

and

ESL INVESTMENTS INC., ESL PARTNERS, LP, SPE I PARTNERS, LP, SPE MASTER I, LP, ESL INSTITUTIONAL PARTNERS, LP,

EDWARD S. LAMPERT, WILLIAM HARKER, WILLIAM CROWLEY, DONALD CAMPBELL ROSS, EPHRAIM J. BIRD, DEBORAH E. ROSATI,

R. RAJA KHANNA, JAMES MCBURNEY and DOUGLAS CAMPBELL

Defendants

Court File No. 4114/15 (Milton)


B E T W E E N:

1291079 ONTARIO LIMITED

Plaintiff

and

ESL INVESTMENTS INC., SEARS CANADA INC., WILLIAM C. CROWLEY, WILLIAM R. HAWKER, DONALD CAMPBELL ROSS, EPHRAIM J. BIRD, DEBORAH E. ROSATI, R. RAJA

KHANNA, JAMES MCBURNEY and DOUGLAS CAMPBELL

Defendants

Proceeding under the Class Proceedings Act, 1992

LITIGATION SERVICE LIST


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TO: NORTON ROSE FULBRIGHT CANADA LLP Royal Bank Plaza, South Tower 200 Bay Street, Suite 3800, P.O. Box 84 Toronto, Ontario M5J 2Z4 Orestes Pasparakis Tel: +1 416.216.4815 Robert Frank Tel: +1 416.202.6741 Evan Cobb Tel: +1 416.216.1929 Catherine Ma Tel: +1 416.216.4838 Fax: +1 416.216.3930 [email protected] [email protected] [email protected] [email protected] Lawyers to FTI Consulting Canada Inc.

AND TO:

LAX O'SULLIVAN LISUS GOTTLIEB LLP 145 King St. West, Suite 2750 Toronto, ON M5H 1J8 Matthew Gottlieb Tel: +1 416 644 5353 Andrew Winton Tel: +1 416.644.5342 Philip Underwood Tel: +1 416.645.5078 Jessica Zhi Tel: +1 416.644.4016 Fax: +1 416.598.3730 [email protected] [email protected] [email protected] [email protected] Representatives of the Litigation Investigator and Lawyers for the Litigation Trustee

ANDTO:

BLAKE, CASSELS & GRAYDON LLP Suite 4000, Commerce Court West 199 Bay Street Toronto, Ontario M5L 1A9 Michael E. Barrack Tel: +1 416.863.5280 Kathryn M. Bush Tel: +1 416.863.2633 Kiran Patel Tel: +1 416.863.2205 Fax: +1 416.863.2653 [email protected] [email protected] [email protected] Lawyers for Morneau Shepell Ltd., in its capacity as Administrator for the Sears Canada Inc. Registered Retirement Plan

AND TO:

SOTOS LLP 180 Dundas Street West, Suite 1200 Toronto, Ontario M5G 1Z8 David Sterns Tel: +1 416.977.0007 Andy Seretis Tel: +1 416.977.0007 Fax: +1 416.977.0717 [email protected] [email protected] ------------- Blaney McMurtry LLP 2 Queen St E #1500, Toronto, ON M5C 3G5 Lou Brzezinski Tel: +1 416.593.2952 Fax: +1 416.594.5084 [email protected] Lawyers for 1291079 Ontario Limited


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AND TO:

BENNETT JONES LLP 3400 One First Canadian Place P.O. Box 130 Toronto, Ontario M5X 1A4 Gary Solway Tel: +1 416.777.6555 Sean Zweig Tel: +1 416.777.6254 Richard B. Swan Tel: +1 416.777.7479 Jason M. Berall Tel: +1 416.777.5480 Fax: +1 416.863.1716 [email protected] [email protected] [email protected] [email protected] Lawyers to the Board of Directors and the Special Committee of the Board of Directors of Sears Canada Inc.

AND TO:

CASSELS BROCK & BLACKWELL LLP Suite 2100, Scotia Plaza 40 King Street West Toronto, Ontario M5H 3C2 Wendy Berman Tel: +1 416.860.2926 John N. Birch Tel: +1 416.860.5225 Natalie E. Levine Tel: +1 416.860.6568 Anna Tombs Tel: +1 416.860.6563 Fax: +1 416.360.8877 [email protected] [email protected] [email protected] [email protected] Lawyers for Certain Former Directors and Officers of the Applicants (Klaudio Leshnjani, James R.G. McBurney, E.J. Bird, Calvin McDonald, Ronald Boire, Deirdra Cheeks Merriwether, Donald C. Ross, Douglass Campbell)


CAN_DMS: \125077696

AND TO:

LENCZNER SLAGHT ROYCE SMITH GRIFFIN LLP Suite 2600 130 Adelaide Street West Toronto ON M5H 3P5 Peter J. Osborne Tel: +1 416.865.3094 Matthew B. Lerner Tel: +1 416.865.2940 Chris Kinnear Hunter Tel: +1 416.865.2874 Chris Trivisonno Tel: +1 416.865.3059 Fax +1 416.865.9010 [email protected] [email protected] [email protected] [email protected] Lawyers for Sears Holding Corporation and Sears Holdings Management Corporation

AND TO:

POLLEY FAITH LLP The Victory Building 80 Richmond Street West, Suite 1300 Toronto, ON M5H 2A4 Harry Underwood Tel: +1 416.365.1600 Andrew Faith Tel: +1 416.365.1600 Jeffrey Haylock Tel: +1 416.365.1600 Sandy Lockhart Tel: +1 416.365.1600 Fax: +1 416.365.1601 [email protected] [email protected] [email protected] [email protected] Lawyers for Mr. Edward S. Lampert, ESL Investments Inc., ESL Partners, L.P., SPE I Partners, L.P., SPE Master I, L.P. ESL Institutional Partners, L.P., and RBS Partners, L.P. (collectively, the “ESL Parties”)


CAN_DMS: \125077696

COPY TO:

PALIARE ROLAND ROSENBERG ROTHSTEIN LLP 155 Wellington St West, 35th Floor Toronto, Ontario M5V 3H1 Ken Rosenberg Tel: +1 416.646.4304 Lily Harmer Tel: +1 416.646.4326 Max Starnino Tel: +1 416.646.7431 Elizabeth Rathbone Tel: +1 416. 646.7488 Fax: +1 416.646.4301 [email protected] [email protected] [email protected] [email protected] Lawyers to the Superintendent of Financial Services as Administrator of the Pension Benefits Guarantee Fund

AND TO:

CASSELS BROCK & BLACKWELL LLP Suite 2100, Scotia Plaza 40 King Street West Toronto, Ontario M5H 3C2 William J. Burden Tel: +1 416.869.5963 Wendy Berman Tel: +1 416.860.2926 John N. Birch Tel: +1 416.860.5225 Fax: +1 416.360.8877 [email protected] [email protected] [email protected] Lawyers for William (Bill) C. Crowley and William (Bill) R. Harker


CAN_DMS: \125077696

Email Litigation Service List: [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected];

TABLE OF CONTENTS

Page No.

PART I - INTRODUCTION .......................................................................................................... 1

PART II - SUMMARY OF FACTS ............................................................................................... 1

PART III - STATEMENT OF ISSUES, LAW & AUTHORITIES ............................................... 3

A. The Litigation Trustee’s oppression claim relating to Sears Canada’s interest discloses no

reasonable cause of action .................................................................................................. 3

B. The Litigation Trustee’s oppression claim on behalf of the Pensioners is an abuse of

process............................................................................................................................... 15

PART IV - ORDER REQUESTED .............................................................................................. 19

SCHEDULE A – List of Authorities………………………………………………………...Tab A

SCHEDULE B – Text of Statutes, Regulations & By-Laws………………………………...Tab B

PART I - INTRODUCTION

1. In its statement of claim, the Litigation Trustee advances one cause of action that has no

reasonable prospect of success and another that is an abuse of process.

2. The portion of the Litigation Trustee’s claim that alleges that Sears Canada Inc. – as

opposed to stakeholders in the company – was oppressed by its own directors discloses no

reasonable cause of action, and should be struck under rule 21.01(1)(b). A corporation cannot itself

be an oppressed person under the s. 241 oppression remedy. The Litigation Trustee claims relief on

behalf of the company that is contrary to the express language of the statute, the purpose of the

statute and the relevant judicial authority.

3. The Litigation Trustee’s representative claim on behalf of the Pensioners should be struck

under rules 21.01(3)(d) and 25.11(c). It is impermissibly duplicative and an abuse of process to

seek relief on behalf of the Pensioners on a basis identical to that relied on by the Pensioners

themselves in their separate claim.

PART II - SUMMARY OF FACTS

4. Sears Canada Inc. (“Sears Canada”) was a Canadian retailer and publicly traded

company. It is incorporated under the Canada Business Corporations Act, R.S.C., 1985, c. C-44

(the “CBCA”). On June 22, 2017, Sears Canada made an initial application and was granted

protection from creditors under the Companies’ Creditors Arrangement Act, R.S.C., 1985, c. C-36

(the “CCAA”).

5. This Court appointed the Litigation Trustee, J. Douglas Cunningham Q.C., to pursue

claims on behalf of Sears Canada and its creditors. He commenced this action on December 19,

2018.

2

6. The defendants Edward S. Lampert, ESL Investments Inc., ESL Partners, LP, SPE I

Partners, LP, SPE Master I, LP and ESL Institutional Partners, LP (the “ESL Parties”) are alleged

to have been minority shareholders of Sears Canada at the time of the 2013 Dividend (defined

below).1 In his statement of claim the Litigation Trustee seeks, among other relief, “a declaration

that the authorization and payment of the Dividend was oppressive and unfairly disregarded and

was prejudicial to the interests of Sears Canada and its stakeholders and an Order setting aside the

Dividend”.2

7. On December 19, 2018, Morneau Shepell Ltd., in its capacity as administrator of the Sears

Canada pension plan, brought an action against the same defendants to this action, alleging, among

other things, that the Sears Canada board’s unanimous declaration of a 2013 dividend (the “2013

Dividend”) was oppressive to the Sears Canada pension plan and its beneficiaries (the

“Pensioners”).3

8. On January 18, 2019, the ESL Parties delivered a demand for particulars to the Litigation

Trustee, seeking particulars as to the identity and expectations of the stakeholders on whose behalf

the Litigation Trustee was bringing an oppression claim.4

9. On January 31, 2019, the Litigation Trustee provided its response to the demand for

particulars. In it, the Litigation Trustee responded that it is bringing the oppression claim on behalf

of “all of Sears Canada’s stakeholders, including its […] pensioners”.5

1 Statement of Claim of the Litigation Trustee, issued December 19, 2018 at para. 34 (“Litigation Trustee Statement

of Claim”), ESL motion record at Tab 2, p. 19 [MR]. 2 Litigation Trustee Statement of Claim at para. 1(d), MR at Tab 2, p. 12.

3 Statement of Claim of Morneau Shepell Ltd., issued December 19, 2018 at paras. 1(c) and 42 (“Morneau Statement

of Claim”), MR at Tab 5, pp. 53 and 64-65. 4 ESL Parties’ demand for particulars from the Litigation Trustee, served January 18, 2019, MR at Tab 3.

5 Litigation Trustee’s response to the demand for particulars, served January 31, 2019 at para 1.1(a) (“Litigation

3

PART III - STATEMENT OF ISSUES, LAW & AUTHORITIES

10. This motion raises two issues:

A. Sears Canada cannot itself be oppressed under s. 241 of the CBCA. This Court should strike

the portions of the Litigation Trustee’s statement of claim that make an oppression claim

on behalf of the company as disclosing no reasonable cause of action under rule

21.01(1)(b) of the Rules of Civil Procedure.6

B. The Litigation Trustee’s oppression claim on the Pensioners’ behalf is impermissibly

duplicative, in light of the separate claim of Morneau Shepell. This Court should strike the

portions of the Litigation Trustee’s response to the demand for particulars that state that the

Litigation Trustee is bringing an oppression claim on behalf of the Pensioners as an abuse

of process under rules 21.01(3)(d) and 25.11(c) of the Rules of Civil Procedure. This Court

should also order that the Litigation Trustee may not pursue an oppression claim on behalf

of the Pensioners.

A. The Litigation Trustee’s oppression claim relating to Sears Canada’s interest

discloses no reasonable cause of action

11. The portions of the Litigation Trustee’s statement of claim that allege that Sears Canada

was oppressed disclose no reasonable cause of action. It is plain and obvious that a corporation

cannot oppress itself or be oppressed under s. 241 of the CBCA.

Trustee Response”), MR at Tab 4, p. 41. 6 Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

4

i. Rule 21.01(1)(b)

12. Rule 21.01(1)(b) provides that “[a] party may move before a judge [ ... ] to strike out a

pleading on the ground that it discloses no reasonable cause of action”.

13. The test on a motion to strike a pleading under rule 21.01(1)(b) is whether it is plain and

obvious that the pleading discloses no reasonable cause of action, or whether the claim has no

reasonable prospect of success.7 Rule 21.01(1)(b) is not all or nothing: it permits the Court to strike

portions of a statement of claim that disclose no cause of action, without striking the entire

statement of claim.8

ii. The improper pleadings

14. At paragraphs 1, 86 and 87 of its statement of claim, the Litigation Trustee seeks relief on

Sears Canada’s behalf under s. 241 of the CBCA. In particular, the statement of claim alleges as

follows:

(1) paragraph 1(d): “[T]he Dividend was oppressive and unfairly disregarded and

was prejudicial to the interests of Sears Canada and its stakeholders”;

(2) paragraph 86: “[T]he Former Directors and Bird acted in an oppressive

manner towards Sears Canada” by “(a) disregarding the reasonable

expectation of Sears Canada” and “(b) using their powers to authorize the

Dividend, which […] disregarded the interests of Sears Canada and its

creditors”; and

7 Hunt v. Carey, [1990] 2 S.C.R. 959 at pp. 976-977 and 979, ESL book of authorities at Tab 10 [BOA]; R. v. Imperial

Tobacco Canada Ltd, 2011 SCC 42, [2011] 3 S.C.R. 45 at para. 17, BOA at Tab 19. 8 See Hunt v. Carey, [1990] 2 S.C.R. 959 at p. 975, in which Wilson J. wrote: “[i]f it is plain and obvious that the action

is certain to fail because it contains some such radical defect, then the relevant portions of the statement of claim may

properly be struck out”, BOA at Tab 10. See also O’Mara v. Air Canada, 2013 ONSC 2931 at para. 83, BOA at Tab 17;

and Dynasty Furniture Manufacturing Ltd. v. Toronto-Dominion Bank, 2010 ONCA 514 at para. 10, BOA at Tab 6.

5

(3) paragraph 87: “It is appropriate for Sears Canada, by way of its Litigation

Trustee, to be the complainant for an oppression claim on its own behalf and

on behalf of its creditors”.9

15. No other plaintiff in the related pieces of litigation has claimed that Sears Canada itself was

oppressed.

iii. Subsection 241(2) of the CBCA does not include corporations in the group of

stakeholders the oppression remedy protects

16. The CBCA draws a distinction between parties that are able to commence an oppression

action and parties whose interests the oppression remedy protects. Section 238 of the CBCA

defines the “complainants” that may commence an oppression action broadly:

238 In this Part,

…

complainant means

(a) a registered holder or beneficial owner, and a former registered holder or

beneficial owner, of a security of a corporation or any of its affiliates,

(b) a director or an officer or a former director or officer of a corporation or any of

its affiliates,

(c) the Director, or

(d) any other person who, in the discretion of a court, is a proper person to

make an application under this Part. [emphasis added]

17. In contrast, s. 241 of the CBCA makes clear that regardless of the identity of the

complainant bringing the litigation, the oppression remedy protects the interests of only four

specifically enumerated groups of stakeholders:

9 Litigation Trustee Statement of Claim at paras. 1(d), 86 and 87, MR at Tab 2, pp. 12, and 29-30 [emphasis added].

6

Application to court re oppression

241 (1) A complainant may apply to a court for an order under this section.

Grounds

(2) If, on an application under subsection (1), the court is satisfied that in respect of

a corporation or any of its affiliates

(a) any act or omission of the corporation or any of its affiliates effects a

result,

(b) the business or affairs of the corporation or any of its affiliates are or

have been carried on or conducted in a manner, or

(c) the powers of the directors of the corporation or any of its affiliates are

or have been exercised in a manner

that is oppressive or unfairly prejudicial to or that unfairly disregards the interests

of any security holder, creditor, director or officer, the court may make an order

to rectify the matters complained of. [Emphasis added]

18. It is possible that Sears Canada may be a proper person under s. 238(d) of the CBCA to

bring an oppression action on behalf of its creditors.10

In appropriate cases, the Court has permitted

a corporation to act as a complainant in an oppression action. However, even where it is a proper

complainant, a corporation cannot claim relief on its own behalf on the basis that it has itself been

oppressed under s. 241, because that provision limits the remedy to the protection of the four

enumerated groups of stakeholders. Where a corporation commences an oppression action, that

proceeding is limited to the protection of the interests of one or more of these four groups.

19. In Olympia & York Developments Ltd. (Trustee of) v. Olympia & York Realty Corp.,11

Farley J. permitted a trustee in bankruptcy that stood in the shoes of a corporation to act as a

complainant in an oppression action. However, he emphasized that the action was brought on

behalf of the corporation’s creditors, and that the alleged oppression related to the creditors’

10

The ESL Parties do not, however, admit this. 11

Olympia & York Developments Ltd. (Trustee of) v. Olympia & York Realty Corp., 2001 CarswellOnt 2954 (S.C.J.),

BOA at Tab 16, aff’d (2003), 68 O.R. (3d) 544 (C.A.).

7

interests.12

Similarly, in Ernst & Young Inc. v. Essar Global Fund Ltd et al.,13

in which the Court

permitted a monitor to act as a complainant under s. 238(d) of the CBCA, the reasonable

expectations that the Court explored in considering the monitor’s oppression claim were those of

the creditors on behalf of which the Monitor brought that claim. In line with these authorities, the

Litigation Trustee’s oppression claim can only be one that seeks to protect the interests of the

enumerated corporate stakeholders. It is a representative claim, not a claim that belongs to the

corporation itself.

20. Numerous authorities confirm that the oppression remedy protects the interests of only the

four enumerated groups of stakeholders, further reinforcing a proposition that the clear language

of s. 241 already places beyond doubt.

21. In BCE Inc. v. 1976 Debentureholders,14

the Supreme Court distinguished between

litigation intended to protect the rights of a corporation and the oppression remedy, which is

intended to protect the interests of the enumerated stakeholders:

Unlike the derivative action, which is aimed at enforcing a right of the corporation

itself, the oppression remedy focuses on harm to the legal and equitable interests of

stakeholders affected by oppressive acts of a corporation or its directors. This

remedy is available to a wide range of stakeholders — security holders, creditors,

directors and officers.

22. The Court went on to emphasize that the protection of these stakeholders’ interests is the

foundation of the oppression remedy.15

12

Olympia & York Developments Ltd (Trustee of) v. Olympia & York Realty Corp., 2001 CarswellOnt 2954 (S.C.J.) at

paras. 30-31, BOA at Tab 16, aff’d (2003), 68 O.R. (3d) 544 (C.A.). 13

Ernst & Young Inc. v. Essar Global Fund Ltd et al., 2017 ONSC 1366 at paras. 61-75, BOA at Tab 7, aff’d 2017

ONCA 1014. 14

BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560 at para. 45 [BCE]. 15

BCE at paras. 60-63.

8

23. In Rea v. Wildeboer,16

a case that dealt with the materially similar provisions in Ontario’s

Business Corporations Act,17

Blair J.A. set out the history that led to the creation of the derivative

action and the oppression remedy, and described the difference between the two. The derivative

action “is an action for ‘corporate’ relief, in the sense that the goal is to recover for wrongs done to

the company itself.”18

In contrast, the oppression remedy provides a complainant:

with the right to apply to the court, without obtaining leave, in order to recover for

wrongs done to the individual complainant by the company or as a result of the

affairs of the company being conducted in a manner that is oppressive or unfairly

prejudicial to or that unfairly disregards the interests of the complainant. The

oppression remedy is a personal claim.19

24. The Court of Appeal wrote in Naneff v. Con-Crete Holdings Ltd.20

that “the provision only

deals with the interest of a shareholder, creditor, director or officer. It follows from a plain reading

of the provision that any rectification of a matter complained of can only be made with respect to

the person’s interest as a shareholder, creditor, director or officer.”

25. In C.I. Covington Fund Inc. v. White,21

Swinton J. wrote as follows:

To obtain an oppression remedy, a complainant must show that the business or

affairs of the corporation in question are or have been carried on in a manner that is

oppressive, or is unfairly prejudicial to or unfairly disregards the interests of a

security holder or creditor. The oppression remedy protects the “reasonable

expectations” of a corporate stakeholder, having regard to the particular facts.

26. In Joncas v. Spruce Falls Power & Paper Co.,22

Cumming J. wrote that “reasonable

expectations must derive from corporate conduct affecting a protected category of person: namely,

16

Rea v. Wildeboer, 2015 ONCA 373 at paras. 14-21 [Rea], BOA at Tab 20. 17

Business Corporations Act, R.S.O. 1990, c. B.16, s. 248. 18

Rea at para. 18, BOA at Tab 20, emphasis added. 19

Rea at para. 19, BOA at Tab 20, emphasis added. Like statements in some other authorities, this statement in Rea

does not draw a clear distinction between complainants entitled to commence an oppression proceeding and

stakeholders whose interests are protected by the oppression remedy, but the content of the statement makes clear that

Blair J.A. had in mind claims brought by protected stakeholders themselves. 20

Naneff v. Con-Crete Holdings Ltd., 1995 CanLII 959 at para. 24 (C.A.). Naneff concerned the OBCA. 21

C.I. Covington Fund Inc. v. White, 2000 CanLII 22676 at para. 21 (Ont. S.C.J.), BOA at Tab 3. Covington concerned

the OBCA.

9

a creditor, director, officer or security holder.” The Court of Appeal expressly approved this

statement in upholding the decision.23

27. In Harris v. Leikin Group Inc.,24

Brown J. (as he then was) wrote that “the reasonable

expectations of specified stakeholders is the cornerstone of the oppression remedy.”

28. The Alberta Court of Queen’s Bench wrote in Piikani Investment Corporation v. Piikani

First Nation,25

that “[t]he oppression remedy is available to claimants for acts of the corporation or

acts that are attributable to the corporation. The corporation itself cannot be a claimant. This is

made clear in s. 241(1) and s. 241(2) of the CBCA.”

29. Academic sources make the same point. In his book Oppression and Related Remedies,26

Markus Koehnen writes:

The concluding language of s. 241(2) states that a remedy is available where the

conduct is oppressive or unfairly prejudicial to or unfairly disregards the interests

of “any security holder, creditor, director or officer.” Harm suffered in any other

capacity is not subject to remedy.

30. In an article in the Canadian Bar Review,27

Professor Jassmine Girgis writes that “the harm

addressed by the oppression remedy must be harm suffered by the complainant in the enumerated

capacities, as a security holder, creditor, director or officer,” and, furthermore:

[T]he harm addressed by the oppression remedy must be direct, personal and

distinct to that shareholder or a small group of shareholders; it cannot be harm that

affects every shareholder in the same way. In other words, as required by the

legislation, it must be harm to the interests of the complainant. The limitation here

22

Joncas v. Spruce Falls Power & Paper Co., 2000 CanLII 22359 at para. 36 (Ont. S.C.J.), BOA at Tab 11, aff’d 2001

CanLII 6156 (Ont. C.A.). Joncas concerned the OBCA. 23

Joncas v. Spruce Falls Power and Paper Company Ltd., 2001 CanLII 6156 at paras. 8-9 (Ont. C.A.), BOA at Tab

12. 24

Harris v. Leikin Group Inc., 2013 ONSC 1525 at para. 478, BOA at Tab 9. 25

Piikani Investment Corporation v. Piikani First Nation, 2008 ABQB 775 at para. 224, BOA at Tab 17. 26

Markus Koehnen, Oppression and Related Remedies (Toronto: Thomson Carswell, 2004) at p. 41, BOA at Tab 24. 27

Jassmine Girgis, “The Oppression Remedy: Clarifying Part II of the BCE Test” (2018) 96-3 Can. Bar Rev. 484 at

pp. 509-510, citations omitted, BOA at Tab 23.

10

is that it cannot be harm that affects the shareholder indirectly, such as that which

would occur if the corporation were harmed, causing share prices to drop. Put

differently, and following the rule in Foss v Harbottle, harm to the corporation (and

indirectly to the shareholders as a collective) is not harm to the complainant

shareholder; harm to the corporation should be addressed by the derivative action,

which is brought in the name of or on behalf of a corporation and requires the leave

of the court. The oppression remedy is intended to address harms done to the

interests of stakeholders affected by the oppressive acts.

31. In an article in the Ottawa Law Review,28

Professor P. M. Vasudev writes:

Derivative actions are meant to protect the corporate interests when persons in

control either harm the corporations or fail to prevent harm inflicted by others.

Derivative actions are about safeguarding the corporation as a whole, rather than

any particular group in it—shareholders, employees, suppliers and so on. This

feature distinguishes derivative actions from the oppression remedy.

32. The authorities, then, are clear that the provision providing for the oppression remedy

means what it says. It protects the interests of four enumerated stakeholders, and not the interests

of the corporation itself.

33. It is noted that in one case, Arend v. Boehm,29

the Ontario Superior Court made reference to

the reasonable expectations of a corporation in the context of an oppression action. In Arend, the

Court found that BitRush, a corporation, was a proper complainant to bring an oppression action

under s. 245(c) of the OBCA.30

The Court went on to find that a director of BitRush had caused the

corporation to act in a manner that violated the reasonable expectations of “BitRush and its

shareholders”.31

28

P. M. Vasudev, “Corporate Stakeholders in Canada—An Overview and a Proposal” (2015) 45-1 Ottawa L. Rev.137

at p. 149, BOA at Tab 25, emphasis added. 29

Arend v. Boehm, 2017 ONSC 3582 [Arend], BOA at Tab 2. The oppression proceeding was also brought by two

directors of the corporation. 30

Arend at para. 53, BOA at Tab 2. Section 245 of the OBCA is functionally identical to s. 238 of the CBCA. 31

Arend at paras. 56-67, 61-62, 64, 77 and 84, BOA at Tab 2. However, at the beginning of both the “Oppression”

(para. 54) and “Remedy” (para. 65) sections of the decision, the Court refers to the interests of only the “shareholders

of BitRush” and “BitRush’s shareholders”.

11

34. The Court in Arend did not consider the issue of whether a corporation could be an

oppressed person under s. 248(2) of the OBCA.32

No party contested the idea that a corporation

could be oppressed, as the application was unopposed and the respondent did not appear at the

hearing. A case stands only for what it decides,33

and Arend did not decide whether a corporation

can be party whose interests the oppression remedy protects. In any event, the Court’s language on

this point is inconsistent with the clear statutory language under s. 248(2) of the OBCA, the same

language in s. 241(2) of the CBCA and the numerous authorities and academic sources cited above.

35. Beyond the clear statutory wording and jurisprudence precluding a corporation from

seeking a remedy for the oppression of itself, the historical purpose of the oppression remedy

highlights the absurdity of the Litigation Trustee’s claim. The oppression remedy is “designed to

address […] the imbalance of power on the part of those in control with the vulnerability on the

part of those having a genuine stake in the affairs of the corporation but no control over its

conduct.”34

36. The oppression remedy is a personal claim.35

It was enacted in the CBCA in 1975 as a

result of the recommendations of the Dickerson Committee, which took the view that the common

law insufficiently protected minority shareholders.36

The Dickerson Committee also

recommended another remedy, the derivative action, the object of which was to “remedy a wrong

to the corporation.”37

While both remedies aimed at protecting vulnerable shareholders, the former

gave a personal cause of action to stakeholders whereas the latter allowed stakeholders to enforce

32

Section 248(2) of the OBCA is functionally identical to s. 242(2) of the CBCA. 33

R .v. Deur et al., [1944] S.C.R. 435 at p. 440, BOA at Tab 18. 34

1413910 Ontario Inc. v. McLennan, 2009 CanLII 22544 at para. 34 (Ont. Div. Ct.), BOA at Tab 1. 35

Rea at para 19, BOA at Tab 20. 36

Proposals for a New Business Corporations Law for Canada, Robert W. V. Dickerson, John L. Howard and Leon

Getz, vol. 1 (Ottawa: Information Canada, 1971) [Dickerson Report], BOA at Tab 22. See p. 7: “The position of the

minority shareholder has always been an exceptionally unenviable one.” 37

Dickerson Report at p. 162, BOA at Tab 22.

12

the rights of the corporation by suing through it.38

The oppression remedy was not intended to

address harms to a corporation.39

37. The absurdity of the Litigation Trustee’s claim is more obvious in light of the factors the

Court in BCE identified as relevant to determining whether reasonable expectations exist,

including “whether the claimant could have taken steps to protect itself against the prejudice it

claims to have suffered”40

and the representations the corporation made to “stakeholders or to the

public in promotional material.”41

These factors are unintelligible in the context of the corporation

itself being oppressed.

iv. Permitting the improper pleading of Sears Canada as an oppressed party to

stand would be unjust in this case and do harm to the law in general

38. The purpose of this motion to strike the Litigation Trustee’s pleading of Sears Canada as an

oppressed party is not simply to hold the Litigation Trustee to the clear language of the statute and

to the numerous authorities that confirm its plain meaning. If the Litigation Trustee is permitted to

carry on with a claim that Sears Canada itself can be an oppressed party under the meaning of s.

241(2) of the CBCA, he will be able to skate over the crucial question of exactly which reasonable

expectations the 2013 Dividend is alleged to have frustrated. The upcoming steps in this litigation,

including the delivery of statements of defence and replies, examinations for discovery, any

motions for summary judgment and the eventual trial should not take place in the shadow of an

impermissible pleading that muddies the waters to the Litigation Trustee’s benefit.

39. In BCE the Supreme Court made clear that a Court faced with an oppression action must

consider two questions: “(1) Does the evidence support the reasonable expectation asserted by the

38

Dickerson Report at pp. 160-161, 163, BOA at Tab 22. 39

Rea at paras. 18-19, 27 and 33-36, BOA at Tab 20. 40

BCE at para. 78. 41

BCE at para. 80.

13

claimant? and (2) Does the evidence establish that the reasonable expectation was violated by

conduct falling within the terms ‘oppression’, ‘unfair prejudice’ or ‘unfair disregard’ of a relevant

interest?”42

In an oppression action the onus to satisfy these factors is on the complainant.43

40. In this case, the Litigation Trustee must identify the reasonable expectations of the

allegedly oppressed stakeholders, and establish that those reasonable expectations were frustrated

in a manner amounting to oppression, unfair prejudice or unfair disregard. The case law makes

clear that a complainant must identify the relevant reasonable expectations precisely and in light of

the relevant context: “the remedy is very fact-specific – what is just and equitable is judged by the

reasonable expectations of the stakeholders in the context and in regard to the relationships at

play.”44

As the Supreme Court wrote in BCE:

[62] … [T]he question is whether the expectation is reasonable having regard to

the facts of the specific case, the relationships at issue, and the entire context,

including the fact that there may be conflicting claims and expectations.

[63] Particular circumstances give rise to particular expectations. …45

41. As in many cases concerning multiple groups of stakeholders, in this case the various

stakeholders’ reasonable expectations will vary depending on each stakeholder’s particular

circumstances. This will be so even though the Litigation Trustee purports to bring a claim on

behalf of a wide range of stakeholders. Different stakeholders will have different reasonable

expectations. For instance, the relevant reasonable expectations of the groups of creditors on

behalf of whom the Litigation Trustee brings this claim will depend on the terms under which they

extended credit, and whether they extended credit before or after the declaration of the 2013

Dividend, among other considerations. Whether the creditors’ differing reasonable expectations

42

BCE at para. 68. 43

BCE at paras. 70 and 137. 44

Harris v. Leikin Group Inc., 2013 ONSC 1525 at para. 476; see also para. 485, BOA at Tab 9. 45

BCE; see also paras. 70-71.

14

have been unfairly disregarded will depend, among other things, on the terms governing the

relationships between them and Sears Canada and on whether they had been paid back before the

commencement of the CCAA proceeding.

42. The content of the different stakeholders’ distinct reasonable expectations and the ways in

which these differing expectations are said to have been violated will be crucial to the defence of

the Litigation Trustee’s oppression claim. If the Litigation Trustee is allowed to plead and rely on

the alleged reasonable expectations of Sears Canada itself, the distinctions between stakeholders’

expectations will be swallowed up into a generalized set of expectations that the company is said to

have had. This result would be contrary to the statute and the case law that has elucidated it. It

would also be unfair to the defendants.

43. Moreover, permitting the oppression remedy to protect the reasonable expectations or

interests of corporations would dramatically expand the remedies open to them. In Rea v.

Wildeboer,46

the Court of Appeal outlined that the incorporation of the oppression remedy (and the

derivative action) into the CBCA arose out of Parliament’s desire to mitigate the harshness of the

rule in Foss v. Harbottle, which states that only a corporation may bring an action for a wrong done

to it, and of the indoor management rule, which permits a majority of shareholders to ratify

corporate acts and thus make them immune from legal action.

44. The oppression remedy under s. 241 creates a new basis for legal redress that does not

depend on the strict legal tests for recognized causes of action. Instead, the oppression remedy

“gives a court broad, equitable jurisdiction to enforce not just what is legal but what is fair.”47

46

Rea at paras. 14-21, BOA at Tab 20. 47

BCE at para. 58.

15

45. The oppression remedy was designed to ensure the fair treatment of individual

stakeholders whose options to redress wrongs were seriously lacking under the common law.48

That purpose justified a new remedy – one that extended beyond the bounds of existing causes of

action.

46. The position and circumstances of a corporation, however, did not justify the same

broadening of the common law. A corporate claim does not suffer from the same impediments that

face individual corporate stakeholders under the rule in Foss v. Harbottle and the indoor

management rule. Instead, a corporation has always been free to commence proceedings for harm

done to it within the frameworks of recognized causes of action – causes of action such as breach

of contract, knowing assistance, knowing receipt, unjust enrichment and many others. The

Litigation Trustee impermissibly seeks to claim the benefit of the generous reach of the oppression

remedy for Sears Canada even though the statutory purpose behind the remedy does not apply to

corporations.

47. For these reasons, it is plain and obvious that the claim at paragraphs 1(d), 86 and 87 of the

Litigation Trustee’s statement of claim to the effect that Sears Canada was an oppressed party

disclose no reasonable cause of action. The clear language of the statute does not permit such a

claim. It should be struck under rule 21.01(1)(b).

B. The Litigation Trustee’s oppression claim on behalf of the Pensioners is an abuse of

process

48. The portion of the Litigation Trustee’s pleadings that alleges oppression on the Pensioners’

behalf is impermissibly duplicative of the Pensioners’ own claim and constitutes an abuse of

process. The reference to such oppression must be struck.

48

Rea at paras. 14 and 19, BOA at Tab 20.

16

49. Rule 21.01(3)(d) provides that “[a] defendant may move before a judge to have an action

stayed or dismissed on the ground that […] the action is frivolous or vexatious or is otherwise an

abuse of the process of the court”.49

Rule 25.11(c) permits a court to strike out “part of a pleading

or other document” on the ground that it “is an abuse of the process of the court.”

50. A proceeding will be an abuse of process where it would serve no useful purpose or would

be a waste of judicial resources.50

One such example is where pleadings “essentially duplicate

claims being advanced in another extant proceeding.”51

51. The Pensioners have commenced a separate claim against the ESL Parties founded on the

same subject matter in Morneau Shepell Ltd. in its capacity as administrator of the Sears Canada

Inc Registered Pension Plan v ESL Investments Inc et al, Court file No CV-18-611217-00CL.52

52. Despite this extant claim, in his response to the demand for particulars dated January 31,

2019, the Litigation Trustee purports to bring an oppression claim on behalf of all “Stakeholders”

of Sears Canada, and expressly includes the Pensioners among these “Stakeholders”.53

It is an

abuse of process for the Litigation Trustee to duplicate a claim that the Pensioners are bringing

themselves.54

53. The doctrine of abuse of process is used in a variety of legal contexts, including “where

allowing the litigation to proceed would nonetheless violate such principles as judicial economy,

49

Rule 21.01(3)(d). 50

Currie v. Halton Regional Police Services Board, 2003 CanLII 7815 at paras. 14-18 (Ont. C.A.), BOA at Tab 5;

Kikla v. Ayong, 2016 BCSC 465 at para. 58 [Kikla], BOA at Tab 13. 51

Kikla at para. 56, BOA at Tab 13. See also Carbone v. DeGroote, 2018 ONSC 109 at para. 33, BOA at Tab 4. 52

Morneau Statement of Claim at paras. 1(c) and 42, MR at Tab 5, pp. 53 and 64-65. 53

Litigation Trustee Response at para. 1.1(a), MR at Tab 4, p 41. The Litigation Trustee’s response to the demand for

particulars forms part of its pleadings and can be considered on a motion to strike: McCreight v. Canada (Attorney

General), 2013 ONCA 483 at para. 32, BOA at Tab 14; Gaur v. Datta, 2015 ONCA 151 at para. 5, BOA at Tab 8. 54

Kikla at paras. 56 and 68, BOA at Tab 2.

17

consistency, finality and the integrity of the administration of justice.”55

Duplicative claims offend

judicial economy and are an “affront to the integrity of the judicial system, given the burden that

unnecessary litigation imposes on the parties.”56

They also threaten the principles of consistency

and finality.57

Allowing the Litigation Trustee to continue its oppression claim on behalf of the

Pensioners would engage these concerns. The Litigation Trustee and Morneau Shepell, could, for

instance, attempt to define the Pensioners’ reasonable expectations differently. This concern is not

merely theoretical: it has already happened. As set out above, in its response to the ESL Parties’

demand for particulars the Litigation Trustee included the Pensioners in the group of stakeholders

on behalf of which it claimed to be pursuing the oppression claim.58

The Litigation Trustee also

made clear that the “creditors” referred to in its statement of claim are all of Sears Canada’s

stakeholders.59

It defined the reasonable expectations of the creditors, drawing no distinction

among the Pensioners and other creditors, as follows:

The creditors reasonably expected that the power of Sears Canada’s directors

would be exercised: (i) in the best interests of the company, rather than in a way

that favoured the interests of the Significant Shareholders; and (ii) in such a way as

to preserve capital for the use of Sears Canada and its business or to satisfy

obligations to Stakeholders rather than diverting it to the company’s shareholders.60

54. In contrast, in its answer to a demand for particulars in which the ESL Parties’ requested

particulars of the reasonable expectations of the Pensioners, Morneau Shepell defined the

Pensioners’ reasonable expectations differently:

The Plan and its beneficiaries reasonably expected that Sears Canada (as

administrator of the Plan) and the Defendants would act in accordance with their

55

Toronto (City) v. CUPE, Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77 at para. 37, BOA at Tab 21. The comment in

CUPE is made in reference to relitigation, but the concerns apply to parallel duplicative litigation too. 56

Kikla at paras. 56 and 66, BOA at Tab 2. 57

CUPE at para. 51, BOA at Tab 21. 58

Litigation Trustee Response at para. 1.1(a), MR at Tab 4, p. 41. 59

Litigation Trustee Response at para. 4.1(a), MR at Tab 4, p. 41. 60

Litigation Trustee Response at para. 3.1(a), MR at Tab 4, p. 41.

18

and/or Sears Canada’s duties to the Plan and Plan beneficiaries. In fulfilling these

obligations, the Plan and Plan beneficiaries reasonably expected that Sears Canada,

its affiliates, officers and directors would act in the same manner that an

independent administrator would have acted in properly discharging the fiduciary

duties and other duties owed to the Plan and Plan beneficiaries, including the duty

to respect the priority of claims against Sears Canada.61

55. This answer focused on the Pensioners’ expectations in relation to duties of Sears Canada

as the administrator of the pension plan, and, notably, included the conduct of Sears Canada as a

subject of the Pensioners’ reasonable expectations, unlike the definition of the Litigation Trustee.

This divergence at the pleadings stage provides a concrete example of the issues that duplicative

litigation can cause.

56. Moreover, the only provision under which the Litigation Trustee could act as a

complainant is s. 238(d) of the CBCA. The wording of this provision does not provide an absolute

right to non-stakeholders to commence an oppression action. It is, instead, discretionary, referring

to “any other person who, in the discretion of a court, is a proper person to make an application

under this Part.” A corporation can commence an oppression action on behalf of stakeholders in

some cases. However, a corporation cannot possibly be a proper party to commence an oppression

action on behalf of a stakeholder when that stakeholder has already commenced its own

oppression action with the representation of able counsel. Striking the Litigation Trustee’s claim

insofar as it purports to represent the Pensioners’ interests would therefore not only rectify a

duplicative abuse of process, but also be in line with the discretionary nature of s. 238(d) of the

CBCA.

61

Response to the demand for particulars by Morneau Shepell, served January 31, 2019 at para 1(a), supplementary

motion record at Tab 2.

19

57. The ESL Parties should face only one claim in respect of the same cause of action. It is an

abuse of process to force the ESL Parties to defend two actions that both allege oppression to the

Pensioners.

PART IV - ORDER REQUESTED

58. The ESL Parties seek an order striking out, without leave to amend, the following full and

partial paragraphs and subparagraphs of the Litigation Trustee’s statement of claim alleging that

Sears Canada was oppressed:

Paragraph To Be Struck

1(d) The words “Sears Canada and”

86 Entire paragraph

86(a) Entire subparagraph

86(b) The words “Sears Canada and”

87 The words “on its own behalf and” and “all similarly”

59. The ESL Parties also seek an order striking out, without leave to amend, the word

“pensioners” at paragraph 1.1(a) of the Litigation Trustee’s response to the demand for particulars,

and an order declaring that the Litigation Trustee cannot bring an oppression claim on behalf of the

Pensioners.

SCHEDULE “A”

LIST OF AUTHORITIES

Case law

1. 1413910 Ontario Inc. v. McLennan, 2009 CanLII 22544 (Ont. Div. Ct.)

2. Arend v. Boehm, 2017 ONSC 3582

3. BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560

4. C.I. Covington Fund Inc. v. White, 2000 CanLII 22676 (Ont. S.C.J.)

5. Carbone v. DeGroote, 2018 ONSC 109

6. Currie v. Halton Regional Police Services Board, 2003 CanLII 7815 (Ont. C.A.)

7. Dynasty Furniture Manufacturing Ltd. v. Toronto-Dominion Bank, 2010 ONCA 514

8. Ernst & Young Inc. v. Essar Global Fund Ltd et al., 2017 ONSC 1366, aff’d 2017 ONCA

1014

9. Gaur v. Datta, 2015 ONCA 151

10. Harris v. Leikin Group Inc., 2013 ONSC 1525

11. Hunt v. Carey, [1990] 2 S.C.R. 959

12. Joncas v. Spruce Falls Power & Paper Co., 2000 CanLII 22359 (Ont. S.C.J.), aff’d 2001

CanLII 6156 (Ont. C.A.)

13. Joncas v. Spruce Falls Power and Paper Company Ltd., 2001 CanLII 6156 (Ont. C.A.)

14. Kikla v. Ayong, 2016 BCSC 465

15. McCreight v. Canada (Attorney General), 2013 ONCA 483

16. Naneff v. Con-Crete Holdings Ltd., 1995 CanLII 959 (C.A.)

2

17. O’Mara v. Air Canada, 2013 ONSC 2931

18. Olympia & York Developments Ltd, (Trustee of) v. Olympia & York Realty Corp., 2001

CarswellOnt 2954 (S.C.J.), aff’d (2003), 68 O.R. (3d) 544 (C.A.)

19. Piikani Investment Corporation v. Piikani First Nation, 2008 ABQB 775

20. R. v. Deur et al., [1944] S.C.R. 435

21. R. v. Imperial Tobacco Canada Ltd, 2011 SCC 42, [2011] 3 S.C.R. 45

22. Rea v. Wildeboer, 2015 ONCA 373

23. Toronto (City) v. CUPE, Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77

Secondary sources

24. Robert W. V. Dickerson, John L. Howard and Leon Getz, Proposals for a New Business

Corporations Law for Canada, vol. 1 (Ottawa: Information Canada, 1971)

25. Jassmine Girgis, “The Oppression Remedy: Clarifying Part II of the BCE Test” (2018)

96-3 Can. Bar Rev. 484

26. Markus Koehnen, Oppression and Related Remedies (Toronto: Thomson Carswell, 2004)

27. P. M. Vasudev, “Corporate Stakeholders in Canada—An Overview and a Proposal” (2015)

45-1 Ottawa L. Rev.137

SCHEDULE “B”

TEXT OF STATUTES, REGULATIONS & BY – LAWS

Rules of Civil Procedure, R.R.O. 1990, Reg. 194

WHERE AVAILABLE

To Any Party on a Question of Law

21.01(1) A party may move before a judge,

[…]

(b) to strike out a pleading on the ground that it discloses no reasonable cause of action or

defence, and the judge may make an order or grant judgment accordingly. R.R.O. 1990,

Reg. 194, r. 21.01 (1).

[…]

To Defendant

(3) A defendant may move before a judge to have an action stayed or dismissed on the ground that,

[…]

Action Frivolous, Vexatious or Abuse of Process

(d) the action is frivolous or vexatious or is otherwise an abuse of the process of the court,

and the judge may make an order or grant judgment accordingly. R.R.O. 1990, Reg. 194, r. 21.01 (3).

[…]

Striking out a pleading or other document

25.11 The court may strike out or expunge all or part of a pleading or other document, with or

without leave to amend, on the ground that the pleading or other document,

2

(a) may prejudice or delay the fair trial of the action;

(b) is scandalous, frivolous or vexatious; or

(c) is an abuse of the process of the court. R.R.O. 1990, Reg. 194, r. 25.11.

[…]

Canada Business Corporations Act, R.S.C., 1985, c. C-44

Definitions

238 In this Part,

[…]

complainant means

(a) a registered holder or beneficial owner, and a former registered holder or beneficial

owner, of a security of a corporation or any of its affiliates,

(b) a director or an officer or a former director or officer of a corporation or any of its

affiliates,

(c) the Director, or

(d) any other person who, in the discretion of a court, is a proper person to make an

application under this Part.

Commencing derivative action

239 (1) Subject to subsection (2), a complainant may apply to a court for leave to bring an action in

the name and on behalf of a corporation or any of its subsidiaries, or intervene in an action to which

any such body corporate is a party, for the purpose of prosecuting, defending or discontinuing the

action on behalf of the body corporate.

Conditions precedent

(2) No action may be brought and no intervention in an action may be made under subsection (1)

unless the court is satisfied that

(a) the complainant has given notice to the directors of the corporation or its subsidiary of

the complainant’s intention to apply to the court under subsection (1) not less than fourteen

days before bringing the application, or as otherwise ordered by the court, if the directors of

https://www.canlii.org/en/on/laws/regu/rro-1990-reg-194/latest/rro-1990-reg-194.html?autocompleteStr=rules%20of%20civil%20procedure&autocompletePos=1#sec25.11_smooth

3

the corporation or its subsidiary do not bring, diligently prosecute or defend or discontinue

the action;

(b) the complainant is acting in good faith; and

(c) it appears to be in the interests of the corporation or its subsidiary that the action be

brought, prosecuted, defended or discontinued.

[…]

Application to court re oppression

241 (1) A complainant may apply to a court for an order under this section.

Grounds

(2) If, on an application under subsection (1), the court is satisfied that in respect of a corporation

or any of its affiliates

(a) any act or omission of the corporation or any of its affiliates effects a result,

(b) the business or affairs of the corporation or any of its affiliates are or have been carried

on or conducted in a manner, or

(c) the powers of the directors of the corporation or any of its affiliates are or have been

exercised in a manner

that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security

holder, creditor, director or officer, the court may make an order to rectify the matters complained

of.

[…]

4

Business Corporations Act, R.S.O. 1990, c. B.16

Definitions

245 In this Part,

[…]

“complainant” means,

(a) a registered holder or beneficial owner, and a former registered holder or beneficial

owner, of a security of a corporation or any of its affiliates,

(b) a director or an officer or a former director or officer of a corporation or of any of its

affiliates,

(c) any other person who, in the discretion of the court, is a proper person to make an

application under this Part. (“plaignant”) R.S.O. 1990, c. B.16, s. 245.

Derivative actions

246 (1) Subject to subsection (2), a complainant may apply to the court for leave to bring an action

in the name and on behalf of a corporation or any of its subsidiaries, or intervene in an action to

which any such body corporate is a party, for the purpose of prosecuting, defending or

discontinuing the action on behalf of the body corporate. R.S.O. 1990, c. B.16, s. 246 (1).

Idem

(2) No action may be brought and no intervention in an action may be made under subsection (1)

unless the complainant has given fourteen days’ notice to the directors of the corporation or its

subsidiary of the complainant’s intention to apply to the court under subsection (1) and the court is

satisfied that,

(a) the directors of the corporation or its subsidiary will not bring, diligently prosecute or

defend or discontinue the action;

(b) the complainant is acting in good faith; and

(c) it appears to be in the interests of the corporation or its subsidiary that the action be

brought, prosecuted, defended or discontinued. R.S.O. 1990, c. B.16, s. 246 (2).

5

Notice not required

(2.1) A complainant is not required to give the notice referred to in subsection (2) if all of the

directors of the corporation or its subsidiary are defendants in the action. 2006, c. 34, Sched. B, s.

38.

Application

(3) Where a complainant on an application made without notice can establish to the satisfaction of

the court that it is not expedient to give notice as required under subsection (2), the court may make

such interim order as it thinks fit pending the complainant giving notice as required. R.S.O. 1990,

c. B.16, s. 246 (3).

Interim order

(4) Where a complainant on an application can establish to the satisfaction of the court that an

interim order for relief should be made, the court may make such order as it thinks fit. R.S.O. 1990,

c. B.16, s. 246 (4).

[…]

Oppression Remedy

248(1) A complainant and, in the case of an offering corporation, the Commission may apply to

the court for an order under this section. 1994, c. 27, s. 71 (33).

Idem

(2) Where, upon an application under subsection (1), the court is satisfied that in respect of a

corporation or any of its affiliates,

(a) any act or omission of the corporation or any of its affiliates effects or threatens to effect a

result;

(b) the business or affairs of the corporation or any of its affiliates are, have been or are

threatened to be carried on or conducted in a manner; or

(c) the powers of the directors of the corporation or any of its affiliates are, have been or are

threatened to be exercised in a manner,

that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security

holder, creditor, director or officer of the corporation, the court may make an order to rectify the

matters complained of. R.S.O. 1990, c. B.16, s. 248 (2).

SEARS CANADA INC., by its Court-appointed Litigation Trustee, J.

DOUGLAS CUNNINGHAM, Q.C.

-and- ESL INVESTMENTS INC. et al.

Plaintiff Defendants


ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

PROCEEDING COMMENCED AT

TORONTO

FACTUM OF THE ESL PARTIES

(Motion to Strike Returnable April 17-18, 2019)

POLLEY FAITH LLP

The Victory Building

80 Richmond Street West, Suite 1300

Toronto, ON M5H 2A4

Harry Underwood (20806C) [email protected] Andrew Faith (47795H) [email protected] Jeffrey Haylock (61241F) [email protected] Sandy Lockhart (73554J) [email protected]

Tel: 416.365.1600

Fax: 416.365.1601

Lawyers for the moving parties/defendants,

Edward S. Lampert, ESL Investments Inc., ESL Partners, LP,

SPE I Partners, LP, SPE Master I, LP, and ESL Institutional

Partners, LP

factum for superior court of justice - fti consultingcfcanada.fticonsulting.com/searscanada/docs/esl...

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